Saturday, 24 September 2011

A plague on both their houses

On Radio 4's You and Yours yesterday, there was a discussion about the report by the Business Innovation and Skills select committee on pub companies (‘pubcos’) that recommends "the introduction of a statutory code, with a genuine free of tie option, based on an open market rent review to help balance out the tenant/pubco relationship". The select committee chair was adamant that, as pubos had failed with self-regulation, statutory regulation was required to safeguard the pub industry.

Then came a spokesperson from the British Beer and Pub Association (BBPA) who said that inflexible statutory regulation was unnecessary as the industry was sorting the problems out, and that the pub tie was an excellent businesss model whereby people who wanted to run their own businesses could do so quickly and easily. She said that if politicians were so concerned about the pub trade, they should stop piling on the beer tax, which has gone up by 35% in recent years.

Both of course are right and both are wrong: each correctly criticises the other, but neither takes responsibility for their own part in the problems facing pubs, including the high rate of closures. As someone once said, take the plank out of your own eye before offering to remove the speck of dust from your brother's.

In the meantime, a new report from accountancy firm Ernst & Young states that British beer tax accounts for 40% of the entire European beer tax bill, even though the UK accounts for only 13% of EU beer consumption. In my view, increases in beer tax have become self-defeating, with no increased income for the government as people drink less and less to compensate for the rocketing prices, and despite what you read alcohol consumption in the UK is slowly dropping. Throw in the costs of businesses going bust, including bankruptcies, job losses and state benefits, and you'd probably find that further increases in beer tax will actually lose the Treasury income.

And as for the BBPA's rosy view of the pubco tie, there are so many people (some I have spoken to) who have sunk their savings into running their own pub only to find the figures for turnover were exaggerated, that they have to pay well over the market rate for supplies of all drinks, that if they manage to turn a pub around despite pubco restrictive conditions and it become a success, the rent is arbitrarily increased so that it is the pubco, not the licensee, who reaps the benefits of all that hard work, and that if they are less successful, they may have to give up the pub and are left with nothing but debt.

If it were up to me, I'd take the BBPA's recommendations on beer tax and the select committee's report on statutory regulation. That couldn't solve problems overnight, but would perhaps begin a process of recovery rather than the slow decline we are now witnessing.